Despite slowdown, long term prospects look bright for logistic companies

MUMBAI: Although the current economic downturn has led to a subdued earnings outlook for the next few quarters, the long-term prospects remain promising for the industry. Due to relative underperformance, these stocks look attractive at these levels.

In the past six months, revenues of logistic companies have been hit due to flat exports. In addition, the recent container freight hike has added the woes of the companies. As a result, the stocks of these companies have under- performed the benchmark Sensex. In the last one year, ET Logistics has given a return of just 8%, while the benchmark BSE-Sensex has grown by 21%.

Going forward, advent of GST would be a game changer for the logistic companies. FMCG companies, which used to set up warehouses based on tax breaks, would then outsource their logistics needs to dedicated logistics companies. In addition, the dedicated freight corridor will improve rail infrastructure between the northern and the western region.

Companies like Concor, Gateway distruiparks and Allcargo are the prime bets in the sector. At current prices, the stocks of Allcargo, Gateway Distriparks and Concor are trading at a PE of 7.2, 11.5 and 14.7 respectively. This is more than 30% discount to its historic valuations.